Appeal from an order of the United States District Court for the Eastern District of New York, Charles P. Sifton, Judge, denying motion for preliminary injunction to prevent use of publication by Arizona State Attorney General of United States Probation Service's presentence report on appellant.
Friendly, Kearse, and Winter, Circuit Judges.
This appeal presents questions as to whether and under what circumstances a presentence report prepared by the United States Probation Service ("Probation Service") for use of the district court in sentencing a defendant in a criminal case may be disclosed to persons other than the defendant, his attorney, or the prosecuting attorney. Defendant Peerless Importers, Inc. ("Peerless"),*fn1 appeals from an order of the United States District Court for the Eastern District of New York, Charles P. Sifton, Judge, denying its motion for a preliminary injunction to prevent use or publication by the Attorney General of the State of Arizona ("Arizona AG") of a presentence report on Peerless prepared by the Probation Service for the antitrust action underlying the present proceedings (hereinafter the "Peerless Report" or the "Report"), and to require the Arizona AG to return the Report to the Probation Service. Peerless contends that the Report was improperly disclosed to the Arizona AG and that the Arizona AG did not show adequate justification for the release of the Report. For the reasons below we agree and reverse.
A. The Underlying Antitrust Action
Peerless is a major wholesale distributor of liquor and wine in Metropolitan New York. In 1981, Peerless and several of its competitors were indicted for allegedly agreeing to raise liquor prices and reduce discounts on liquor and wine, in violation of § 1 of the Sherman Act, 15 U.S.C. § 1 (1976). The defendants initially pleaded not guilty, but some months thereafter moved to change their pleas to nolo contendere. The government opposed the motions, stating its reasons and a summary of its factual contentions in a memorandum (hereinafter "Government's Plea Memorandum") that was submitted to the court under seal. This memorandum was eventually unsealed by the court and allowed to become part of the public record.
Judge Sifton granted the defendants' motions to plead nolo contendere. Thereafter, the Probation Service prepared presentence reports to assist the court in determining the appropriate fines to be imposed. The Peerless Report included, inter alia, financial data collected from Peerless itself, a description of the government's contentions, taken from the Government's Plea Memorandum, and certain hearsay information from unidentified law enforcement authorities relating to a Peerless officer. The hearsay statement has been the principal focus of the present controversy. The Report was disclosed to Peerless, whose attorney advised the court that it was "relatively complete," but urged that "unique extenuating factual circumstances" asserted by Peerless in support of its change of plea should also be considered, and that the $200,000 fine recommended by the government be reduced. No issue was taken with the Report's accuracy. On November 11, 1981, the court entered a judgment of conviction of Peerless, imposing a fine of $200,000.
B. The Arizona Liquor License Proceedings
In November 1981, a wholly-owned subsidiary of Peerless purchased the stock of Mazel Corporation ("Mazel"), a liquor wholesaler licensed by the State of Arizona. The Arizona Department of Liquor Licenses and Control ("DLLC") was notified that Peerless had entered a plea of nolo contendere in the antitrust action in New York. Mazel's licenses were thereafter renewed by the DLLC. Mazel then purchased two additional Arizona liquor wholesalers and merged all three companies into All American Distributing Co., Inc. ("All American") in May 1982.
In October 1982 the superintendent of the Arizona DLLC commenced a proceeding against All American to revoke its liquor licenses on the ground that the judgment of conviction of Peerless in the antitrust action, together with five disciplinary proceedings against Peerless or its wholly-owned subsidiary before state liquor control agencies in New York and Connecticut, indicated that All American's parent companies had failed to maintain the qualifications, capability, and reliability required under Arizona law. Following the submission by counsel for All American of various materials relating to the antitrust proceeding, the superintendent of the DLLC sought a copy of the Probation Service's presentence report on Peerless.
C. Disclosure of the Report to the Arizona AG and the Proceedings Below
The first request for the Peerless Report was made by Arizona Assistant Attorney General Therese L. Martin on February 8, 1983, in a telephone call to the Probation Service's Record Room in the Eastern District of New York. Martin identified herself to the clerk with whom she spoke and asked that the Peerless Report be sent to the Arizona AG. After a second telephone conversation with the same clerk on March 2, the Peerless Report was received by Martin on March 7. No formal or written request had been made. The Report was unaccompanied by any cover letter or memorandum.
Martin then attempted to telephone the attorney who had represented the government in the antitrust suit to inquire whether her dissemination of the Report -- including providing it to the DLLC hearing officer and making it part of the public record in Arizona -- would violate any rules or regulations. After conversations with several government attorneys and a Probation Service official, Martin was advised that the Probation Service would communicate with Judge Sifton with respect to the release of the Report. Martin stated that she would not release the Report until receiving further word from government authorities.
On March 14, the Probation Service sent a memorandum to Judge Sifton stating that Peerless had applied for a liquor license in Arizona and asking the court's approval to release the Peerless Report to the Arizona AG in connection with the license application proceedings. Approval was granted on March 16, 1983. The Probation Service memorandum was inaccurate in its description of the Arizona proceedings, and it did not reveal that the Report had already been sent to the Arizona AG.
A Probation Service official informed Martin by telephone on March 22 of Judge Sifton's March 16 approval. Martin requested written confirmation that it was permissible for the Arizona AG to use the Report; she was advised to write a letter to the Chief United States Probation Officer in Brooklyn.
On March 25, Peerless obtained an order to show cause signed by Judge Sifton, temporarily restraining the Probation Service and the Arizona AG from publishing, discussing, or using the Report, and requiring them to show cause why a preliminary injunction should not issue. Following the submission of papers by the interested parties, and oral argument on April 1, 1983, the court denied Peerless's motion. Using the analysis required by Jackson Dairy, Inc. v. H.P. Hood & Sons, 596 F.2d 70, 72 (2d Cir. 1979) (per curiam), for the issuance of a preliminary injunction,*fn2 the court found that Peerless could suffer irreparable injury to its reputation and good will as a result of public disclosure of certain statements in the Peerless Report.*fn3 It concluded, however, that Peerless had not shown that it was likely to succeed on the merits of its claim that there should be no disclosure of the Report by the Arizona AG. The court ruled that neither the early procedural irregularities -- i.e., the release of the Report prior to court approval, the failure to disclose the prior release when the request for approval was made, and the misdescription of the Arizona proceeding -- nor the ex parte nature of the request to release the Report would warrant an order of nondisclosure. The court ruled that the contents of the Report also did not justify the preservation of confidentiality. It found that the Report contained no grand jury material that had not already been made public through the Government's Plea Memorandum. Further, it observed that under Fed. R. Crim. P. 32(c), presentence reports that are disclosed to a defendant must also be disclosed to the government and that the Rule does not bar the government from disclosing the information. The court viewed the Probation Service as a body with administrative expertise which had -- if not initially, at least on reconsideration -- exercised its informed judgment in determining that disclosure was appropriate, and the court viewed that determination as entitled to considerable deference. Accordingly, the court concluded that although Peerless had shown substantial questions going to the merits which were fair ground for litigation, it had not shown a likelihood that it would eventually prevail in establishing that disclosure was unwarranted. Finally, the court concluded that Peerless had not demonstrated that the balance of hardships tipped decidedly in its favor, because at no time had it denied the accuracy of any statements in the Peerless Report, and thus its interests failed to outweigh those of a state agency seeking information to assist it in determining whether the licenses of Peerless's subsidiary should be revoked.
This appeal followed, and on April 12, a panel of this Court stayed matters pending the determination of the appeal. For the reasons below, we now ...